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Remortgage or Secured Loan

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 5, 2023

Remortgage or Secured Loan

If you are looking to free up money to invest in home improvements, a new car, or other reasons, there are a number of options available to you.

Knowing which option best suits your needs without in-depth knowledge of the financial market can be challenging.

This article will explore remortgaging your home, taking out a secured loan, and exploring both advantages and disadvantages to help you decide which option is more suitable for your personal circumstances.

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Remortgaging Explained

Remortgaging is taking out a new mortgage with a different lender. This is typically done when you are coming to the end of an existing deal, are looking for a more competitive interest rate, or would like to release equity from your home.

You may find the best offer from your existing mortgage lender, or you might want to explore other options.

If you plan on remortgaging before the end of your current deal, there will typically be charges associated with that. In some cases, paying charges and moving to a better rate can still be economically viable.

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Pros and Cons of Remortgaging

If you are planning to remortgage to free up equity from your home, it is important to look at the pros and cons of doing this to determine whether this is the best option.

Remortgaging Pros

  • Remortgaging allows you to shop for more competitive interest rates and can help you save money. You will also have the opportunity to adjust the term length should you wish to pay it off more quickly.
  • If you don’t like the uncertainty of a variable rate, you will have the chance to secure a fixed-rate mortgage, so you know exactly how much your monthly repayments will be.
  • Depending on how much equity you have available in your property, you may be able to remortgage to borrow a substantial sum of money. This can help if you have expensive home improvements that need urgent attention.
  • Remortgaging and freeing up equity to pay other bills can allow you to consolidate your debt. This should only be considered in extreme circumstances, as the repayable interest will typically be higher than most short-term debt.
  • If your property has gained value while you have been paying your mortgage, your loan-to-value (LTV) may have reduced. This will put you in a better position to negotiate a more competitive mortgage rate.

Remortgaging Cons

  • Mortgage applications can be difficult. if you are trying to remortgage through a different mortgage provider, you must pass affordability checks. This means your current means of income, debt, and credit score will all be thoroughly checked.
  • Remortgaging to borrow money can be an expensive option in the long term. It can extend your repayment term and increase your monthly repayments, so it must be given serious consideration.
  • Remortgaging before the end of your current term will typically result in charges. When you add the cost of these charges to the additional time, it will take you to pay off the amount you borrow, and it can work out as an expensive way to borrow.
  • If you plan to remortgage to free equity ties up in your home, you may risk losing a good interest rate by leaving early. Always try to weigh up the long-term financial implications by looking at the available interest rates on the market.
  • Borrowing against your home by remortgaging can put your home at risk if you fail to keep up with repayments.

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Remortgaging Considerations

If you are considering remortgaging your home to free up funds, it is important that you research the market to ensure you find the most competitive rates and terms for your needs.

Loan Corp is in a position to offer expert mortgage advice and can help you find the best options on the market.

You should consider all costs involved in remortgaging, which include;

  • Valuation costs for your property
  • Conveyancing costs
  • Booking fees
  • Completion fees
  • Early repayment charges
  • Exit fees

Before completing remortgage applications, getting a decision in principle will provide you with all the information you need to make an informed decision. There is no commitment on your end, but it does not guarantee you will be accepted. A soft credit check will be carried out, but this will not negatively impact your credit score.

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Secured Loans Explained

Secured loans use assets as security. Where a personal loan typically relies on the borrowers’ credit rating, a secured loan uses an asset like a house as a way for the borrower to secure larger loans.

Using your home as an asset to borrow against minimises the risk for the lender and makes it more likely your application will be accepted. A secured loan can also be known as a homeowner loan or a second-charge mortgage.

 

Pros and Cons of Secured Loans

As with all important financial decisions, you should ensure the options you consider suit your needs.

Finding the best deal involves better understanding the advantages and disadvantages of all available options. The pros and cons of secured loans should help you make an informed decision.

Secured Loans Pros

  • Secured loans can allow you to borrow large amounts in comparison with unsecured personal loans. With a property used as security, lenders have more security and will typically see the application as having a lower risk.
  • Taking out a secured loan and meeting monthly repayments will help you build a good credit score. The benefits of having a better credit score include greater credit options and more favourable interest rates.
  • Taking out a secured loan gives you the freedom of longer repayment terms, resulting in lower monthly repayments.

Secured Loans Cons

  • Because you are using your home as security against the loan, if you fail to keep up with repayments, there is a risk that your house may be repossessed. This is the reason lenders carry out stringent affordability tests proper to acceptance.
  • Some lenders may implement an early repayment charge if you want to repay the loan before the end of the agreed term.
  • While you might benefit from longer terms and lower monthly repayments, you will typically pay more interest in the long term.

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Secured Loan Considerations

Before taking out a secured loan against your property, you must be sure you can keep up with repayments. Reducing other outgoings can help to minimise the risk of financial difficulty.

Ensuring your credit score is healthy can make a difference in whether your application will be considered and the rates on offer.

Taking the time to check your credit score and challenging any mistakes can benefit loan applications.

Always take the time to ensure you only borrow what is needed, as lower borrowing amounts against properties with greater equity will be looked on more favourably by lenders.

Take the time to work out all options’ monthly costs and total costs to ensure you are getting the best long-term deal.

Using a broker will help you find the best options and ensure you are prepared for your application. Multiple applications will result in a number of hard credit checks being carried out, which can reflect poorly on your financial status.

 

Secured Loans or Remortgaging, Which is Better?

Deciding whether remortgaging or taking out a secured loan is best for you will depend on your circumstances.

Both options have a range of benefits and disadvantages that must be considered before making a decision.

If your income or employment has changed since securing your existing mortgage, you may find remortgaging your property to be more challenging. In this case, a secured loan might be the better option if you have sufficient equity in the property.

Secured loans are also typically quicker to process than remortgaging, and you are less likely to face an early repayment charge than you are with remortgaging,

Secured loans can also be a good option for people with poor credit scores, as the loan is secured against your property, minimising the risk to the lender. If this is the case, a secured loan can also help to repair your credit score.

The best way to determine which option will best suit your needs is by getting financial advice from an experienced and respected source. Loan Corp can offer mortgage broker services and provide you with the advice you need to make a well-informed decision.

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Financial Advice from Loan Corp

Making your mind up about which financial products best suit your needs can be challenging. That is why Loan Corp is happy to help by providing expert financial advice.

We will look at your personal circumstances to find the perfect solution for you. We have access to hundreds of mortgage lenders, specialist lenders, and state-of-the-art systems that allows us to find the most suitable lender in a fraction of the time it might take you to contact each individually.

Our years of experience puts us in the position to help with a remortgage, loan applications, and debt consolidation.

If you are coming to the end of your current mortgage with your current lender and want to find competitive rates, we can explore your options with you.

If you plan to get a secured loan, we can advise on the best options and lenders that provide homeowner loans.

We will also be able to look at the legal fees and charges associated with remortgaging, bad credit loans, or paying your entire mortgage balance off.

Contact us today at 0808 301 9509 or fill out our online form, and we will give you the help you need for financial peace of mind.

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FAQs

Will a secured loan affect remortgaging?

Having a secured loan can affect remortgaging as lenders will carry out affordability checks and risk assessments to ensure you are able to make your monthly repayments.

As long as you continue to make your mortgage and loan repayments, you should be able to find a lender to remortgage your property, as you will appear to be a trustworthy and low-risk borrower.

Can I get a secured loan if I am self-employed or have a poor credit history?

Different lenders will have different requirements for loan applications. Because secured lending has the security of an asset, you will typically be able to find a new lender easily enough.

Will I have to pay to get out of my initial mortgage term?

There will typically be a charge for leaving an outstanding mortgage term early. When you first agree to the mortgage with your existing lender, this will be agreed upon.

Using a mortgage broker will help you find the best mortgage deal with terms and rates that can make paying early repayment charges worthwhile, as the new rate will save you more money over the long term.

 

Final Thoughts

Choosing between a secure loan or remortgage can be made easier by getting in touch with Loan Corp. Our expert financial advice will help you make an informed decision based on your personal circumstances.

Your employment, existing mortgage, equity in your property, and credit score will all play a part in determining whether a secured loan will be the best option or whether you should consider a remortgage.

Reading the pros and cons above should help you decide, but it is important to remember the long-term implications of both if you fail to keep up with repayments.

Remortgaging your property to raise finance can result in you paying back a significant amount in interest as the terms are typically longer.

The terms of a secured loan are typically shorter than remortgaging. However, it will give you more flexibility than unsecured loans as you can agree to longer terms and greater amounts.

Whichever option you choose, always ensure you have thoroughly researched your options and fully understand the terms and conditions of your new agreement.

Contact us now for expert advice on which to choose.

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